The Maryland Department of the Environment (MDE) has contracted
with the University of Maryland, through the Center for Integrative
Environmental Research, to conduct an independent study of
the economic and energy impacts related to Maryland’s
potential participation in the Regional Greenhouse Gas Initiative
(RGGI).

Background
On April 6, 2006, Maryland Governor Robert Ehrlich signed into
law the Maryland Healthy Air Act, which had been passed with
large majorities in Maryland’s General Assembly. The purpose of
the law is to improve air quality in Maryland by requiring power
plants in the state to reduce a variety of emissions, including
sulfur dioxide, nitrogen oxides, and mercury. In addition, the
law requires the six largest power plants in the state to reduce
emissions of carbon dioxide, a significant greenhouse gas.

Production of electric
power is vital to the State of Maryland but greenhouse gases, such
as carbon dioxide that are a byproduct of this production represent
a significant negative externality. It is important to carefully
balance the gains from inexpensive and reliable electricity with
programs to mitigate the negative environmental effects of these
gases. To this end, the Maryland Healthy Air Act (Senate Bill 154)
was recently passed. This bill requires the State to become a full
participant in the Regional Greenhouse Gas Initiative (RGGI) no
later than June 30, 2007. RGGI currently comprises seven
Northeastern and Mid-Atlantic states that in December 2005 entered
into a memorandum of understanding to develop and implement a carbon
dioxide emissions trading program for electric generators located
within their states. The trading program would begin in January
2009.

Based on requirements from MDE, this project will analyze multiple
aspects of the RGGI program and how it both positively and potentially
negatively might affect the State of Maryland as well as neighboring
regions. In particular, our impact study will evaluate whether
the State's participation in the RGGI has or may have an adverse
impact on the:

-- Preservation and enhancement of the economic welfare of
the residents of the State;
-- Maintenance of a safe and reliable electric power supply in the State,
-- Adequacy of the energy supply in the State, including the potential for power
plant shutdowns,
-- Ability of persons who own, lease, operate, or control an affected facility
to compete in neighboring states, or,
-- Electric rates for residents of the State.

The study shall take into consideration a number of factors,
including:

-- The number of states that are included as full participants
in the RGGI,
-- The mix of energy resources in the states that are included as full participants
in the RGGI; and,
-- Availability of credits among participating states.

The analysis of the aforementioned items is a complex task
which necessarily involves experts in energy, the environment,
economics, and modeling. To this end, the University of Maryland’s
Center for Integrative Environmental Research (CIER) has assembled
a talented team of researchers and industry experts. CIER will
have overall responsibility for the project making sure that
the issues mentioned above are carefully analyzed and reported
in a clear and comprehensive way.

Project Modeling Researchers from Johns
Hopkins University (JHU) and Resources
for the Future (RFF) will be partnering with the University
of Maryland as subcontractors, and will be applying their
expertise in the modeling of the electric power grid as well
as the resulting environmental impacts. In particular, both
JHU and RFF will be using existing models -- Oligopolistic
Power Market Model (JHU) and Haiku Model (RFF) -- that can
directly answer questions such as adequacy of the energy
supply, generator competitiveness, electricity rates, and
reliability issues in addition to providing some summary
economic measures such as producer and consumer surplus.
These models have already been applied in different contexts
to address energy sector issues in Maryland. In addition,
the University of Maryland itself will draw upon its expertise
in electric power and environmental issues. In terms of the
economic effects, Towson
University’s (TU) RESI will be brought in to use
their input-output model to measure the economic welfare
impact of RGGI participation on the State of Maryland.

The resulting analysis and report will consequently provide
the State with a comprehensive review of all of the major
impacts of Maryland’s participation in RGGI so that it can make
appropriate decisions for the benefit of Maryland and its
residents. The assessments presented to the State will be based
on the best available science, modeling and economic analysis
conducted by the most qualified individuals and institutions. A
study report detailing the result of the various model runs will
be provided to MDE in January 2007